DESIGNING CUSTOMER CENTRIC ORGANIZATION

ANKOOR SHIRISH DOSHI

HPGD/JA14/0644

SPECIALIZATION: General Management

WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT & RESEARCH

Year of Submission: June 2016

ACKNOWLEDGEMENT

I, Mr. Ankoor S Doshi would like to express my sincere gratitude to the management of

Bluestar India Ltd . for giving me opportunity to highly educative & Practical knowledge in

customer service department in order to focus & give importance to customer centricity.

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I would like to thank to all my team members such as Mr. Mahesh Thorat for their

valuable time & guidance during my project. I am also grateful to Mr. Dhiraj Tiwari for their

kind support & providing me challenging atmosphere.

Last but not least, I would also like to thanks all my friends & family members, who had

directly or indirectly given their kind co-operation & encouragement. I admit that co-operation &

morality to keywords to success.

Ankoor Shirish Doshi

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APPENDIX-1

This is to certify that the project work titled Customer centric organization is a confide work

carried out by our employee Mr. Ankoor Shirish Doshi working as a Manager-Customer

Service, a candidate for the final year Post Graduate Diploma in Business Administration

(PGDBA- General Management ) examination of WELINGKAR INSTITUTE OF

MANAGEMENT, MUMBAI, Roll No:- HPGD/JA14/0644, Under our guidance and direction.

Guides :-

Mr. Vijay Acharya Mr. Mahesh Thorat

Technical Head Regional Service Manager

Date:-03/04/2016

Place:-Mumbai

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PREFACE

I take this opportunity to present report on “Designing a Customer centric organization ” and put before the readers some useful information regarding my project.

I have made sincere attempts and taken every care to present this matter in precise and compact form, the language being as simple as possible.

I am sure that the information contained in this volume certainly prove useful for better insight in the scope and dimension of this project in its true perspective.

The task of completion of project though being difficult was made quite simple, interesting, and successful due to deep involvement and complete dedication of my colleagues.

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INDEX

Sr No Subject Page No.

1 INTRODUCTION TO COMPANY 6

2INTRODUCTION TO CUSTOMER CENTRIC ORGANIZATION 10

3 SURVIVING THE CUSTOMER REVOLUTION 12

4 CUSTOMER CENTRICITY: HOW MUCH IS ENOUGH? 21

5DESIGNING A CUSTOMER CENTRIC ORGANIZATION 34

6 LEADING THROUGH MANAGEMENT PROCESSES 40

7 CASE STUDY 48

8 BENEFITS, CONCLUSION & LIMITATIONS 59

9 BIBLIOGRAPHY 60

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1. INTRODUCTION TO COMPANY

1.1 Blue Star India Limited

Blue Star is India's leading airconditioning and commercial refrigeration company, with an annual turnover of over ₹3200 crores, a network of 35 offices, 5 modern manufacturing facilities, 2500 employees, 2200 dealers and 500 retailers. Blue Star's integrated business model of a manufacturer, contractor and after-sales service provider enables it to offer an end-to-end solution to its customers, which has proved to be a significant differentiator in the market place. In fact, every third commercial building in the country has a Blue Star product installed.

The Company fulfills the cooling requirements of a large number of corporate, commercial as well as residential customers. The Company also offers expertise in allied contracting activities such as electrical, plumbing, fire-fighting and industrial projects, in order to offer turnkey solutions, apart from execution of specialised industrial projects.

Blue Star's other businesses include marketing and maintenance of imported professional electronics and industrial products and systems, which is handled by a wholly owned subsidiary of the Company called Blue Star Engineering & Electronics Ltd.

Blue Star has business alliances with world-renowned technology leaders such as Rheem Mfg Co, USA; Hitachi Medical Corporation, Japan; Carel, Italy; Danfoss, Denmark; Bitzer, Germany; Emerson, USA; Aeroflex, USA; Kitz, Japan; and many others, to offer superior products and solutions to customers.

The Company has manufacturing facilities at Dadra, Himachal, Wada and Ahmedabad, which use modern, state-of-the-art manufacturing equipment to ensure that the products have consistent quality and reliability. The Company has a manufacturing footprint of about 1 lakh sq m, manufacturing over 300 models across 25 product lines. The Company's mainstay of product development and R&D has been energy efficiency, coupled with eco-friendly and sustainable products.

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1.2 BSL’s Values and Beleifs

To deliver world class customer experience

Focus on profitable company growth

Be a company that is the pleasure to do business with

1.3 Corporate Purpose

Bluestar is a leading Indian engineering company with substantial competence in and

Revenues from 3 steams of Business

Airconditioning

Commercial Refrigeration

Professional Electronics and Industrial Systems

As of now companys footprint is only on India . However company wish to progressively

Build a sizeable presence in chosen international markets over the next few years .

1.4 Code of Conduct :

1. Obeying the Law

Comply with the laws and regulations of the countries where we do business.

2. Integrity

Promote ethical and honest behaviour.

Act with competence, diligence and in good faith without misrepresenting or

Concealing material facts.

Comply with Company rules and regulations.

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Honour commitments.

Avoid personal, financial or business activities that could conflict with the

Company’s interests and disclose these activities carried out by family

members to the Company.

Respect the confidentiality of internal Company information and ensure that any

such confidential information is not misused for personal gain.

3. Towards Customers

Strive to provide a world class customer experience in terms of products and

services.Compete in the market by offering innovative solutions that meet customers’

4. Towards Shareholders

Enhance shareholder value by focusing on long term profitable growth and

prudent financial management.

Provide real shareholder returns in the form of a fair and sustainable dividend

policy.

Practise high standards of Corporate disclosure by timely, regular and reliable

reporting of the Company’s activities, financial position and performance to

enable a proper evaluation of the Blue Star scrip.

5. Towards Employees

Employ, reward and promote people solely on the basis of merit, without any

discrimination on the basis of religion, gender, caste, social background or

special connections.

Provide a comfortable, healthy and safe work environment which will also

protect the interests of female employees.

Develop and enhance employees’ skills and competencies to enable them to

perform their jobs and grow to assume new responsibilities.

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Be a learning organization.

Recognize the right of employees to freedom of expression and freedom of

association.

6. Towards Business Partners

Treat suppliers, dealers, associates and subcontractors as an extended arm of

Blue Star and create mutually beneficial relationships with them.

7. Social Responsibility

Support needy and deserving causes in society through financial and/or

managerial assistance.

1.5 Domain Expertise

Blue Star has over a period of time established itself as an expert in the field of central airconditioning and commercial refrigeration. Our expertise lies across different industries and sectors and we constantly try to leverage this expertise to expand the purview of our operations in diverse industries

A) Airconditioning

Banks

Builders

Multiplexes

Educational Institutions

Hospitals

Hotels

Industrial Applications

IT

Malls

Pharma

Government

Eateries

Telecom

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B) Refrigeration

Hospitality

Dairy and Ice Cream parlours

Hospitals and Research Institues

Speciality applications

1.6 Manufacturing

"To deliver a world-class customer experience", has been the core philosophy of Blue Star. The Manufacturing division of the Company also aspires to be of world-class caliber.

Blue Star's foray into manufacturing was a modest effort at producing ice candy machines in the 1940s, at first from a small office in Forbes Street at Colaba in Mumbai. It was only in the mid 1960s that Mohan T Advani expanded Blue Star's manufacturing base by buying a factory in Thane, then a distant suburb in Mumbai.

Currently, Blue star has manufacturing facilities at ,

Wada

Dadra

Ahmedabad

Himachal Pradesh 1

Himachal Pradesh 2

1.7 Initiatives

Enviormental Initiative :

Blue Star's factories have been exquisitely landscaped with lawns and flowering plants dotting the campus. Trees have also been planted on a proactive basis even outside the Blue Star factories. As a responsible organization, special ETP plants are installed to dispose off the wastes generated. Additionally, all our factories are designed for rain water harvesting.

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The Wada plant has achieved a gold rating from IGBC for its sustainable systems and processes.

Social Initiative :

Blue Star firmly believes that organizations must look beyond making profits and should contribute to the development and welfare of the society. This attitude is most evident in the outreach initiatives organized by Blue Star's factories.

Blue Star factories take active participation in providing temporary shelters and essentials for the victims of an earthquake, sponsoring health check-ups and health education programs in local schools.

The families of operators are an integral part of social development. Blue Star gives them appropriate advice on personal matters, financial and investment matters. The family members are also imparted training on diverse subjects. They are taught English as well.

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2. INTRODUCTION TO CUSTOMER CENTRIC ORGANIZATION

In order to be a successful and viable firm in the twenty-first century, a company must have a

customer-centric capability. The early movers will gain a competitive advantage, while

stragglers will scramble for a competitive necessity.

In most industries today, it is difficult to make money by just selling products and services to

customers. Stand-alone products and services commoditize rapidly and collapse profit margins.

The new foundation of profitability is the customer relationship. This thinking results from

studies that show that sales to existing customers are more profitable than sales to new

customers. It costs more to acquire new customers, and they are more likely to switch. Most

desirable is a loyal, long-term customer who has a relationship with the company. But to be

effective, customer loyalty and relationships have to be managed; companies need to organize

around these loyal customers.

Today, nobody owns the customer. The customer owns you. The customer may want to talk

to the salesperson or to the distributor. The customer may want to talk directly to the service

department. He or she may want to deal face-to-face or by telephone, fax, or e-mail. And a

customer who poses a question or complaint by e-mail expects the salesperson to provide an

answer to the query during their next face-to-face meeting. If the salesperson cannot answer the

question, the customer sees no relationship. To have a relationship, the company needs to be able

to do business the way the customer wishes.

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Different customers want to do business differently, and being profitable today means having the

capabilities that allow for malleability. It means forming long-term relationships with the most

valuable customers. It means interacting with these customers across multiple points of contact

and integrating the results of these contacts into a consistent company position for the customer.

It means learning from the contacts to customize the company’s offerings for different customer

segments. It means learning about new customer needs and expanding the company’s offering to

meet them. It means using knowledge of customers to package products and services into

solutions that create value for the customers. And doesn’t that sound like a lot of work! Many

firms are reluctant or unwilling to make the organizational changes necessary to build a

customer-centric capability; the preference thus far has been to keep it simple and create simple,

autonomous business units that control their resources and can be accountable for their

performance.

In other words: keep it simple for management. But that kind of simplicity means making it

difficult for the customer. It is then up to the customer or some third party to do the integrating

and capture the value of serving the customer. Keeping it simple for management leaves money

on the table for more complex organizations to capture. By implementing a customer-centric

capability, the company can now keep it simple for the customer, eliminating third-party

solutions and redirecting that errant cash flow. Why would firms hesitate to create a more

profitable organization by building customer-centricity? Beyond fiscal myopia, which motivates

companies to ignore implementation altogether, it appears to be a combination of two factors.

One is an underestimation of the changes needed to implement customer-centric systems, such as

customer relationship management (CRM) software. Management cannot simply insert a CRM

system into a product-centric organization and expect to capitalize on customer relationships.

Early returns show that half of all CRM implementations fail to achieve the expected results, and

one in five actually damages customer relationships (Kehoe, 2002). Once again, we have to

relearn the fact that organizations are complex human systems into which new technology must

be painstakingly introduced. The second factor that limits the time and energy invested by

management is the belief that they are already customer-centric. For the past ten or fifteen years,

these firms have been working hard to become “close to the customer” or “customer focused.”

While acknowledging that this work has been necessary and useful, it does not make the

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company customer-centric. To be customer-centric, a firm must literally organize around the

customer.

3. SURVIVING THE CUSTOMER REVOLUTION

For better or worse, one fact has become increasingly clear over the past ten years: the

marketplace is customer driven. The days of customers chanting, “We’ll take what you offer,”

have been replaced with an expectant, “Give us what we’d like, with a side order of

customization.”

The power in the buyer-seller interaction has been moving systematically to the buyer. In many

industries, global competition and industry overcapacity have given buyers more choice, and

they are learning how to use it. Electronic commerce and information transparency have reduced

seller knowledge advantages.

The competitive game has clearly shifted to one of pleasing an increasingly more global,

knowledgeable, and powerful customer. The need for customer-centricity is not going away, and

it is up to each company to determine the level of application—and hierarchical restructuring—

required for success in this morphing marketplace.

3.1 The Status Quo Has to Go

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The product-centric mind-set is an entrenched one and, like the pit bull, does not relinquish

dominance easily. Because it has been the application of choice for so long, managers may even

be fooled into believing they are leaving it behind in favor of customer-centric applications,

when in fact product-centricity continues running the show with merely a cosmetic gloss of

customer focus sprinkled around the edges. The ideas presented in this book are challenging,

particularly in the amount of reorganization they demand from the status quo product-centric

corporation. While acknowledging the need for a new customer-centric capability, many

companies, tensely watching their financial bottom line, may be tempted to apply a “fingertip”

version of the capability to their current structure. It may seem to be the most prudent course of

action to dabble in a cursory commitment or apply a cosmetic overlay that seems to do the job.

It cannot be stressed enough how detrimental this toe-in-the water mind-set can be. A company

that truly requires a customer centric capability will not achieve its goals without its full

integration. It is not fiscally prudent at all to go halfway, since it will almost certainly be funds

wasted in their entirety. In fact, this approach may end up costing the company more than just its

initial wasted investment; the harm done to the workings of the entire structure by an incomplete

capability at this level of importance can be enormous, leaving a company bereft in areas well

beyond its original need for customer-centricity. It will undoubtedly leave disappointed

customers behind whose trust will be difficult to earn back.

3.2 The Bottom Line

The bottom line about your bottom line is that customer centricity pays off. For some time,

academic studies and consultant studies have demonstrated that being market driven or customer

loyalty focused results in higher profitability. The most complete discussion of customer-

centered profitability is by Selden and Colvin (2003), who argue that superior results come from

managing your business as a portfolio of customers. That means computing the profitability of

customers, segmenting them on a profitability basis, and then organizing around those segments.

They present a good process for getting started on a customer-centric strategy and the attendant

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financial systems. This book presents a complete guide to organization design to implement this

path to superior economic performance.

3.4 Let’s Get Fiscal

Let us examine the financial ramifications. By satisfying a customer who wants to use

relationships, the customer-centric firm becomes more profitable. Academic research, using the

term market driven rather than customer-centric, shows strong relationships between being

market-driven and profitability, sales growth, and new-product success. Also, the company that

implements a customer-centric capability is situated to steer commissions away from the

previously required third-party process suppliers, not to mention winning business over other

companies that have they already become competitively customer-centric. The final coup may be

the largest. Studies argue that the most profitable customer is the existing loyal customer Indeed,

its predicts that in the customer economy, investors will value companies based on the sum of

the values of their customer relationships. Customer loyalty becomes incrementally more certain

as customer-centricity is implemented. With the tight, customized relationships—the “virtuous

circle”—established using applied customer solutions, repeat business becomes more and more

dependable in an otherwise harshly competitive and fickle marketplace.

3.5 Mind over Mind-Set

When you have determined, the level of customer centricity that your company requires, it is in

your best interest to commit to that level and no less. Regardless of the level of application your

firm requires, your managerial mind-sets require a high level commitment; even if the

implementation proceeds at the recommended level, it can be sabotaged in ways both subtle and

blatant by a crew that has not gotten onboard. Mind-set is important to successful customer-

centralization. The manager whose thought processes are mired in the past is destined to

venture forth halfheartedly, if at all. Not only is a clear and positive outlook essential to

committing to the proper degree of application, a robust and eager anticipation is needed as

implementation unfolds. This may sound like a recommendation to chant positive affirmations to

compensate for a gloomy outlook. On the contrary, it is an invitation to discover exactly how

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promising this process is and how little downside is involved. Once the win-win nature of the

capability becomes clear, a robust positivity should enter the psyche without effort.

3.6 The Customer-Centric Imperative

In this increasingly customer-driven environment, the call for a customer-centric capability rings

out loud and clear. As the expectations and requirements of the customer become more

pronounced and complex, the casual customer-focused behaviors of the past grind toward a

forced obsolescence. What was once an option is now an imperative? Consequently, there has

been an increase in the strategic priority assigned to the customer dimension of the business, with

many companies now organizing around the customer. Creating customer facing organizational

units is a challenge because these companies have structures that are still based predominantly on

business units, countries, and functions. It is essential that companies not be tied to their past

structures, to the detriment of their existing needs.

3.7 Product-Centric versus Customer-Centric

The best way to understand where we need to go is to get a clear picture of where we’ve been.

The contrast between the product and customer-centric organizations is shown in Table 3.7. As

the table shows, a product-centric company tries to find as many uses and customers as possible

for its product. In contrast, a customer-centric company tries to find as many products as possible

for its customer, and it has to integrate those products. From this basic strategic difference, other

different organizational features flow. Product-centric companies are structured around product

profit centers called business units. Information is collected around products. Business reviews

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focus discussions around product lines. The customer-centric company is structured around

customer segments. Information is collected and profits measured around customer categories.

Management discussions are focused on customers. There are similar contrasts around processes,

performance measures, human resource policies, and management mind-sets.

Perhaps the most striking difference is that a customer-centric unit is on the side of the customer

in a transaction. A server salesperson at IBM is on the side of the seller—the product-centric

server business. However, the outsourcing and consulting people at IBM will suggest a Hewlett-

Packard server if it makes more sense for the customer. In order to maintain credibility with the

customer, the people from the customer-centric global services business must not be biased

toward IBM equipment. They must be on the side of the customer in the buyer-seller transaction.

More than any other feature, this bias creates a permanent tension between product and customer

units.

The argument above has painted the extremes of product- and customer-centricity. Not every

solution provider will require the extreme end of this organizational capability; the application

can take

PRODUCT CENTRIC COMPANY Vs CUSTOMER CENTRIC COMPANY

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Table 3.7

Many forms. It should be noted that the more complex a form is necessary, the greater is the

accompanying lateral networking capability will be required to expedite functionality. Chapter

Two delineates and helps readers define the level of customer-centric application they require;

the requisite lateral networking capabilityis examined in Chapter Two as well. The balance of

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this chapter further delineates the customer centric capability, pinpointing customer needs and

desires and the methods to address them. It then provides a model for strategy and

Organization.

3.8 The Rise of the Customer Dimension

Motivated by the increasing buyer-power influence—and the correct thinking that this is where

longevity, competitive edge, and financial profitability lie—most industries are addressing the

increasing strategic importance of the customer. The specific factors causing this increase vary

with the industry, but either individually or collectively, all businesses are experiencing these

factors:

• The globalization of the customer

• The preference of customers for partnerships or relationships

• The rise of e-commerce

• The customer’s desire for solutions

3.9 Globalization

Since 1985, the process of globalization has been driven by increasing amounts of foreign direct

investment. The result is that more companies, and therefore more customers, have a direct

presence in more countries. Often these global customers—preferred customers in existing

countries—object to receiving marginal treatment from a supplier’s subsidiary on entering a new

country. These customers want a consistent and consistently high level of service in all countries

where they are serviced. Indeed, one supplier was chastised by a customer who had been dealing

with thirty-seven sales forces providing thirty-seven different standards of service.

The global customer is creating pressure on suppliers to coordinate across countries and

businesses. This desire for cross-unit coordination can also be an advantage for the supplier. For

example,

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ABB was an early mover into many countries, Eastern Europe in particular, and now uses its

extensive presence to host and provide services to its customers as they enter new countries in

which ABB is already present.

3.10 Customer Relationships

The pressure for coordination across existing structures is even greater when customers want

partnerships or relationships with their suppliers. Professional services firms are finding that

clients want one or two global advertising agencies, auditors, cash management banking

suppliers, and outsourcers for information technology. In most industries, customers prefer fewer

suppliers in order to establish closer, longer-term relationships. For suppliers, these global

partnerships mean a coordination of all countries in which the customer desires integrated

services.

3.11 Electronic Commerce

E-commerce is another integrating force that can be used to focus on the customer. When a

company with a single brand uses its Web site as its storefront, it presents a single face to the

customer. The Web site should be designed around the customer’s needs, not around the

supplier’s product capabilities. The site should be designed to do business the way the customer

wants to do business. In order to appear as a single company to the customer, the company needs

to integrate its businesses, subsidiaries, channels, and functions.

Another integrating force is the management of interactivity with customers. Electronic

connectivity with customers allows the company to recognize and remember each customer,

interact with them and remember more about them, and then customize the company’s offerings

based on the knowledge of the customer. Most companies, however, have not mastered

integrated customer interactions. Interactivity requires the management of dialogues and content

across all media with which the company interacts with the customer: Web site, e-mail, call

center, salespersons, service representatives, and so on. The dialogue needs to be managed over

time. The last contact with the customer needs to be remembered, along with the

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last issue of concern and how it was resolved. The resolution needs to be recorded, and the next

dialogue must commence from there. All contacts and issues are to be remembered. The idea of

interactivity is to collect and integrate all data across all functions, subsidiaries, and product lines

in order to get a complete picture of each customer’s value and needs. Only then can the

company react as a single company and be seen by the customer as a single company.

The customer then receives a consistent brand experience across all the touch points with the

company.

3.12 Solutions

Perhaps the driving factor now facing suppliers is the growing customer preference for solutions

or systems instead of stand-alone products. To be sure, customers still order truckloads of

desktops from computer manufacturers, but they are also ordering trading rooms or call centers.

At IBM, these solutions require the integration of multiple business units in multiple countries

with multiple outside suppliers. These solutions are not simply multiple standalone products that

are bundled together and offered at a discount. The preferred solutions create value for the

customers by packaging products and services in ways that the customers cannot easily do for

themselves. Solutions therefore require an in-depth knowledge of the customer in order to

identify the solutions that will be perceived as valuable and an ability to integrate product lines.

In-depth customer. Knowledge is needed to identify the solutions that the customer will see as

valuable. Then the supplier will need the ability to coordinate multiple profit centers from both

inside and outside the company to create the value. Neither of these capabilities comes easily.

Real estate agencies and banks have been searching for years for a mortgage solution for time-

challenged home buyers that would combine the home loan, appraisal, title, title insurance, home

insurance, and everything else into a single, sign-once package. Most of us are still waiting.

In addition to creating solutions, suppliers are trying to customize them. When everyone pursues

the most profitable customers, they compete away the profits. One approach to holding onto

valuable customers is to customize the solutions. Customization requires yet more in-depth

knowledge of the customer and additional capability to integrate products and services into

unique solutions. So integral are solutions to the customer-centric capability that a large section

of Chapter Two is devoted to an examination of the strategies necessary to achieve them.

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3.13 Strategy and Organization Model

One of the primary barriers to converting to customer-centric organization is the belief that a

company is already customer-centric when it is not. Most companies have spent the past twenty

years getting closer to the customer using focus groups and measuring customer satisfaction. But

just placing customers more prominently on the company’s radar screen does not make the

company customer centric. That transition requires that the company literally organize around

the customer. The next section defines what is meant by organization (it is more than structure)

and then what is meant by a customer-centric organization. Readers can then judge for

themselves how customer-centric their companies really are. They will then be able to judge how

far their companies need to go in order to make the transition.

A model for linking different strategies to different organizations is shown in Figure star model

It depicts an organization as consisting of five dimensions.

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4. CUSTOMER CENTRICITY : HOW IS MUCH IS ENOUGH?

4.1 Customer Relationship Strategies

A number of authors, using slightly different wording, have argued the case for becoming

customer-centric (Day, 1990, 1999; Vandermerve, 1999; Wiersema, 1998; Peppers and Rogers,

1997, 2001; Selden and Colvin, 2003), and have described the details of a customer relationship

strategy. They make several points that need to be underlined here. First, many customers want

relationships with key suppliers. Although companies are using auctions and reverse auctions to

purchase commodities, they are choosing a few long-term suppliers for their unique

requirements. Second, customers want close relationships through which they can engage in

dialogue with suppliers for the purpose of detailing their customization desires. Third, these

dialogues create opportunities for astute suppliers to discover unmet customer needs and

requirements, and can then expand their offerings to include more products and services. More

important, these suppliers can develop packages of products and services that create value for

customers. These packages or solutions make the customer more effective, and the more

effective the customer feels as a result, the more the customer will engage in dialogue with and

use the supplier. A virtuous circle can result. Following this prescription to establish a

relationship ultimately leads a corporation to offer more than stand-alone products; it leads it to

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offering solutions. Let us look at several solutions strategies that will determine the level of

customer-centricity.

4.2 Strategic Choice

The different types of solutions described here will guide the choice of organization to

implement that strategy. But first there must be the conscious choice of a customer relationship

strategy for the company. The contrast between Nestlé and Procter & Gamble is illuminating.

Both are consumer packaged goods manufacturers de-levering a large number of products to the

same retail customers. On our strategy locator (described later in this chapter), both would

measure 5 on the scale and scope dimension. Yet Nestlé has chosen to remain a product-centric

company and uses informal processes only to coordinate account management around the large,

global retailers. P&G, in contrast, has chosen to focus on these retailers and form global supply-

chain partnerships. Some retailers, like Wal-Mart, even outsource the management of product

categories and aisles to them.

So a company still needs to do its strategy homework to decide whether becoming customer-

centric will be an advantage for it. In other industries, gaining customer-centricity is becoming a

necessity. Both Hewlett-Packard and Motorola saw that the digital revolution held out

opportunities too good to pass by. Currently, almost all product-centric consumer electronics

companies, like Sony and Philips, are experiencing the digital pull to provide solutions. In the

automotive industry, the tier I suppliers to the auto original equipment manufacturers (OEM) are

finding themselves faced with a few very large customers. For those in tier I, becoming customer

centric is less of a choice and more of a necessity. (The automotive supply chain is led by the

OEMs like General Motors and Toyota. They are supplied by the tier I suppliers, which are

supplied in turn by the tier II suppliers, and so on.) The points here are that there are industry-

and company specific factors that must be weighed when choosing whether to implement

customer relationship strategies. However, in many—if not most—industries, these factors are

leading companies to become more customer-centric and to offer solutions. The following types

of solutions strategies will help to determine how customer centric you need to become.

4.3 Different Types of Solutions

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Companies that follow a relationship strategy that leads to solutions bundle their products

together and add software and services. These packages create more value than the customers

can create for themselves by buying only the stand-alone products. For the customer, solutions

constitute a limited form of outsourcing, which allows them to focus on their core business. For

the suppliers, solutions constitute an alternative to products that commoditize rapidly. The

challenge to the supplier is to create an organization that can package and deliver the solutions.

The organization that can deliver these solutions is one that fits with the solutions strategy. There

are four dimensions of solutions:-

strategy—two major and two minor—that appear to make a difference to the organization. The

major dimensions are the scale and scope of solutions and the degree of integration of products

and services; the minor dimensions are the types of solutions and the percentage of total revenue

deriving from solutions.

4.4 Scale and Scope.

The first major strategic factor having a great organizational impact is the scale and scope of the

solution. Scale and scope refer to the number of products and the number of different kinds of

products that are combined into a solution. For example, a small-scale and -scope solution would

be a local area network for a work group. A dozen desktop computers, a shared printer, and disk

storage could all be linked by an ethernet cable and form a network. A larger-scale and -scope

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solution would be computer-aided design (CAD) system for an engineering department of

several hundred engineers. This solution would require desktops, servers, storage units, CAD

software, database software, network software, and installation and maintenance services. It may

also require financing and training of the engineers. This CAD solution comprises many more

products and many different kinds of products—software and services as well as hardware

products. At the extreme end of scale and scope, Mitsubishi Trading Company could order state-

of-the-art trading floors for ten thousand traders at six worldwide sites. This solution requires

hardware, software, and services for computers, telecom, financing, and training. Large turnkey

projects such as these are an extreme challenge to organization design and require a highly

integrated approach.

4.5 Integration.

The second major dimension is the degree of integration between the components that comprise

a solution. Integration varies from a loose assortment of products to a highly integrated

combination. In between are combinations that use modular architectures. Little integration is

needed between products supplied by agriculture firms to farmers. The firms try to bundle seeds,

herbicides, insecticides, and consulting. However, the farmer can easily buy each as a stand-

alone product from a different supplier. An example of larger-scale but still limited integration

can be found at ISS in Europe and ARAMARK and ServiceMaster in the United States. They try

to provide as many simple services as possible, with one-stop shopping for security, catering,

janitorial, parking lot management, landscaping, building maintenance, and many other similar

services. But each is a relatively independent service that could be provided by an independent

service company. A more integrated offering is the set of solutions from computer companies.

Figure 4.5.1 shows what Sun Microsystems calls the integrated stack. The stack shows hardware

on the bottom, software in the middle, and services on the top. All hardware and software

components have to operate in an integrated manner. (The services are somewhat more

independent.) But thanks to standards like the Java programming language, components using

Java can be substituted for other components. For example, a customer could choose BEA’s

middleware or IBM’s Websphere and substitute it for Sun’s i-Planet middleware. Therefore,

components in the information technology industry must be able to operate with other-branded

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components; by following standards, the customer has the choice of mixing and matching. At the

extreme are integral solutions in which the components are unique but are designed specifically

to work together. A simple integral solution would be an antilock braking system (ABS) for an

auto manufacturer. Each ABS is unique to an automobile model. Johnson Controls is a more

complex example. The company designs and manufactures interiors for Toyota, Chrysler, and

other automobile OEMs. Each Toyota model has a unique interior comprising

Figure 4.5.1

unique parts; these parts cannot be used on a Chrysler interior. The significance of the integration

dimension for the organization is the coordination required. The organization reflects the

solution. The more interdependent the components are, the more interdependent are the

organizational units responsible for those components and the larger the challenge is to rapidly

mobilize them. The combination of scale and scope with integration determines the coordination

requirements and the organizational features to provide the necessary coordination. Figure 4.5.2

shows this combination and some different solutions strategies that have been discussed. Figure

4.5.2 shows that scale and scope and integration increase as the solutions move from the lower-

left to the upper-right corner. The consequence is that the coordination requirements increase in

the same manner. We will focus first on the low levels and then examine the medium and then

the more complex solutions and customer-centric organizations.

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Figure 4.5.2

4.6 Types of Solutions .

There are two main types of solutions: horizontal and vertical. Horizontal solutions are generic

and apply across customer categories. For example, Sun Microsystems creates and delivers a

human resource portal solution that can be used for the human resource function across all

industries. IBM also delivers industry-specific solutions. For example, e-Agency is a solution to

put the agency network of an insurance company on the Internet. These industry-specific

solutions are referred to as vertical solutions. Clearly, the vertical solutions require a more

customer-centric organizational unit than do the horizontal solutions.

4.7 Revenues.

The last strategic dimension is the percentage of total revenues that comes from solutions. If, like

Motorola, solutions contribute 10 percent or less, the firm can simply add a solutions unit whose

task is to integrate the firm’s products into solutions. When the percentage gets higher, as at

IBM, the company has sufficient volume to specialize the solutions units that serve different

customer segments. Instead of one solutions unit, IBM has about twelve, each specializing in a

customer segment as several in global services for the generic horizontal solutions. The Provider

Challenges. In summary, a solutions provider desiring to respond quickly to customer

opportunities faces greater challenges as its strategy increases in the scale and scope of the

solution provided and the degree of integration of the components comprising the solution. Scale

and scope increase the number of organizational units that must be integrated quickly.

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Integration relates to the coordination effort needed to accomplish the requisite integration. In

combination, these two factors determine the amount of customer centricity that is needed and

the strength of customer-facing organizational units. The Strategy Locator Now that customer

relationship strategies have been defined and detailed, it is time to determine your specific

company’s requirements in these areas. Of utmost importance to your company is the level of

customer centricity that it should implement. Too little or too much could

prove significantly counterproductive, so ascertaining the proper level is key. The following lists

have been compiled to help you determine the level—low, medium, or high—that will give your

corporation or division optimal performance. Locate your company on each of the lists for scale

and scope and for integration. Pick the location on the list that best describes the offerings of

your company or division.

4.8 Scale and Scope

• My company has two to five similar products or services to sell to the same customer.

• We offer five to ten mostly products and services.

• We have ten to fifteen products or services of different types to sell to the same customer.

• We have fifteen to twenty variegated products or services to sell to the same customer.

We have more than twenty products or services of various different types to sell to the same

customer. Integration

• My company provides stand-alone products to the same customer with common invoice and

billing (“one-stop shopping”).

• We have a set of minimally connected stand-alone products (like a common brand, common

experience, combined shipment).

• We have minimally packaged (themed) components that need to work together for customer

segments.

• We have modular components of products and services that need to work tightly together as a

system.

• We have very tightly integrated packages/bundles/full solutions of products and services to

offer the customer.

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If your total from both lists is one to three, then you will benefit most from the information for

the light-level implementation of the customer-centric application. Locations on the two lists

totaling four to seven would require the midlevel implementation of the application. A total of

eight to ten means that your corporation will gain the most benefit from the full, strong-level

implementation of customer-centricity. (Figure 4.8 illustrates your score)

Figure 4.8

4.9 Creating a Lateral Networking Capability

In order to implement a responsive customer-centric capability, companies also need a lateral

networking capability. Because they have been organized by business units, countries, and

functions, organizing around the customer requires that they create networks across these

dimensions. To create multiproduct solutions for global customers, a company must work

through lateral networks. A simple company with a few local customers selling a single product

can work through a functional hierarchy. But a company with multiple product lines in multiple

countries using multiple functions must work less through hierarchy and more through networks.

Indeed, a company needs a network for each strategically important dimension. Some

companies, like Philips, have organized around global product lines called business units. They

have created country and functional networks to coordinate across product lines. Other

companies, like Nestlé, have organized around country and regional profit centers. They have

created product (called strategic business units) and functional networks to coordinate across

their geographical structure.

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There are different kinds of networks, and the organization design challenge is to match the right

kind of network with the strategic importance of the customer dimension. Some networks are

informal, and others are formal with varying degrees of strength.

These formal networks vary in power and in the cost to coordinate across the other dimensions.

A list of these networks is shown in Figure 4.9. This is an ordered list, with the simplest,

cheapest, and easiest to use listed first. The further up the list, the more powerful the networks

and the more costly and difficult to employ them. The designer should start at the bottom of the

list and proceed up until a network is found that matches the coordination requirements of the

customer dimension for their business. This list corresponds to the score on the strategy locator.

The bottom of the lateral forms is for stand-alone products and the top for highly complex

solutions. The low and medium levels of complexity require increasingly more powerful forms

of lateral returnable’s.

4.10 Informal Networks and E-Coordination

Informal or voluntary networks form naturally in all organizations. Management, however, can

initiate them and then let them proceed under their own energy. Nestlé is an example, with

informal networks that have formed around global customers. Although Nestlé, unlike a

corporation such as Procter & Gamble, has not strategically focused on cross-border customers

like Carrefour or Wal-Mart, the Nestlé country managers and country account managers for Wal-

Mart routinely exchange information and ideas about the global retailers on an informal basis.

This informal exchange was judged to be sufficient until the Internet allowed more formal

communication (while still maintaining informal coordination). Now the country manager in the

headquarters country of the global customer maintains a database about that customer and issues

e-mails and updates about the customer. Anyone dealing with the customer can add information.

TYPES OF NETWORKS FOR CUSTOMER FACING UNITS

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Figure 4.9

ideas. But this is still an informal network: each country treats the information as an input and

then acts in the best interest of its product lines and country profit and loss statement (P&L). This

form is called e-coordination in Figure 4.9. More intensive and more formal versions of e-

coordination can be used. (A version will be illustrated by an investment bank in Chapter Four.)

The formal communication among all people interacting with customers is the approach taken by

companies, such as the investment bank, wanting to show one face to the customer. Each contact

is recorded and entered into a database. Others can see this running record when they deal with

the customer. Each person then deals with the customer according to function but records all

information, to be used across functions. This electronic coordination is a slight increase in the

cost and effort to coordinate across units for the customer.

4.11 Formal Teams

Formal teams are the next level of strength that can be applied to a customer network, usually

implemented when a customer desires more than informal coordination. Citibank started with

teams for a few accounts and expanded them to over 450 within a few years to accommodate all

customers that wanted a coordinated cross border service. An example of this level is the

formation of global or key account teams, which are created by appointing all of a customer’s

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sales and account representatives to an account team for that customer. These representatives,

from all product lines and all countries, exchange information, as the Nestlé informal networks

do, but also meet regularly, prepare an account plan, and agree on customer-specific goals. The

account manager in the customer’s home country usually leads the team, which consists of a few

core members and a larger extended team to encompass the salespeople from every customer

location.

The customer teams can be strengthened and assume more activities when customers want

partnerships along the supply chain. Wal-Mart and P&G provide an example. P&G initially

formed a team of its salespeople that represented all products that P&G provided to Wal-Mart.

The team was expanded to include manufacturing, distribution, marketing, information

technology, and finance. This team of about eighty people, representing various functions from

all product lines, worked to synchronize the product and order flow from P&G factories to Wal-

Mart warehouses to minimize inventories and cut cycle times. Today, as Wal-Mart expands

globally, this team consists of 250 people from different functions, product Lines, and countries.

Degussa Automotive Catalysts takes the team one step further, including research and

development (R&D) participation. Degussa Sales people serve DaimlerChrysler by coordinating

across borders (like the lower-complexity Citibank application does) and also Partnering along

the supply chain to synchronize their production with the Daimler Chrysler assembly lines (as

Procter & Gamble does with Wal-Mart).

In addition, Degussa engineers determine DaimlerChrysler’s new-product needs and coordinate

with the automaker on creating new catalysts for new engines on Daimler’s automotive

platforms. Degussa creates customer-specific, engine-specific, and platform-specific catalysts for

exhaust emissions. Its formal team structure is described and analyzed as an example of the low

level of customer-centricity and solutions complexity. Formal customer networks can therefore

vary from a few key account teams for salespeople; to supply-chain-partnership teams of sales,

logistics, and other functional people; to new-product development teams that represent all

functions, including the various engineering functions. For companies like Degussa, this

customer team organization is sufficient to meet the needs of its most important customer. Other

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companies, like Citibank, take the further step of creating a fulltime Co-coordinator to manage

all of the customer team activities.

4.12 Integrator

The next step to move the customer dimension to a more powerful position is creating a

coordinator for key accounts. When a company creates fifty or more teams and the customer

wants still more coordination, the key account or global account coordinator role is a useful

addition to the informal networks and formal customer teams. The coordinator provides two new

factors. First, the coordinator becomes a voice for the customer on the management team, which

usually consists of managers of product lines, geographies, and functions. The coordinator gets

the leadership thinking in terms of a portfolio of customers, customer priorities, and customer

centricity. Customer teams can also appeal to the coordinator in resolving conflicts. The teams

can solicit a high-level voice to defend them in conflicts with more product-centric parts of the

company. The second task of the coordinator is building and managing the infrastructure that

supports customer teams. The coordinator assumes the role of managing customer information

systems and communications across customer teams. The coordinator usually creates training

programs for managers and team members regarding the role and operation of key accounts.

Many coordinators create a common planning system for customer plans: fifty customer teams

are likely to create fifty planning formats, and the coordinator Agrees on a single, common one.

Another key addition to the infrastructure is a customer accounting system, which leads to

customer P&Ls—customer profitability is a key measure in setting customer priorities.

Asymmetries in costs and revenues always occur across geographies. The customer account

manager and team in the customer’s home country Expend extra effort to make a sale to their

customer. Often the initiative is successful, but the customer’s first purchases are for its

subsidiaries in other countries. Thus, the costs are incurred in the home country, but revenues are

booked in other countries. A global accounting system for customers can identify these

asymmetries, and management can correct for them. When companies like Citibank expand to

over 450 teams, the network coordinator is often expanded into a network coordination

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department. At Citibank, the 450 customers were organized into industry-specific units, and a

network coordinator was appointed for each industry group. All of these infrastructure additions

can be combined in the planning process. The countries and product lines can set customer

specific goals for key accounts, and then customer teams, countries, and product lines will

pursue an aligned set of goals. When a higher level of organization is required to coordinate the

countries and product lines, a further step up the lateral organization ladder may be chosen.

4.13 Matrix Organization

The next step to enhance the power base of the customer dimension is the formation of units

within countries and product lines that are dedicated to customers, customer segments, or

industries and report to the network coordinator for the customer unit. In countries where the

company may not control 100 percent of the equity, joint ventures that serve multinational

clients are often created between the parent company and the local subsidiary. The assumption

here is that the customer dimension has attained a strategic importance equal to the countries or

business units. This importance is expressed by making the customer organization an equal

partner in the decision-making process. When the customer needs still more prominence in the

organizational structure, there is one more complexity that may be added.

4.14 Separate Customer Line Organization

The final step is to create a separate customer-facing structure by gathering all dedicated

customer-specific resources from the product lines, countries, and functions. Companies serving

the automotive customer like Johnson Controls have formed customer business units (CBUs).

Companies like IBM form customer segment profit centers by gathering all relationship

managers into industry groups. These industry groups call on product profit centers for additional

staffing as the opportunities require. They are usually profit centers themselves and are measured

on customer profitability. These separate customer-facing units are the most powerful—and most

customer centric form of organizing around the customer.

4.15 Matching Organizational Units and Solutions Strategy

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The important point is that the level of power and authority vested in the customer-centric

organizational units should match the level of solutions strategy. As a company introduces a low-

solutions strategy, it should use a level of lateral forms such as formal teams. When it chooses a

medium level of solutions strategy, it should include a higher level of coordination, such as a

network coordinator, in addition to the informal lateral forms

Figure 4.16

Finally, the high level of solutions strategy requires a separate customer unit to achieve the

necessary level of customer-centricity. Chapter Five illustrates IBM’s organization to implement

its high complexity solutions strategy. Thus, the choice of type of strategy shown in Figure 4.9

should be matched by the strength of the customer organizational form shown in Figure 4.16.

4.16 Conclusion

An essential tool for implementing the application is lateral networking capability, which can be

delineated in five cumulative levels of complexity.

The art of the implementation process comes from discerning the appropriate amount of the

customer-centric application and choosing the requisite solutions and a corresponding level of

lateral network complexity. The subject begins this process with the first steps, referred to as

light-level application. In this chapter, the different solutions strategies were described and

placed on a strategy locator. You can locate your strategy using the strategy locator and then

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determine how much power and authority you need to allocate to the customer dimensions of

your organization. Lateral forms were described as the means by which power and authority can

be aligned with the strategy locator.

5. DESIGNING A CUSTOMER CENTRIC ORGANIZATION

THE STAR MODEL

5.1 Strategy

• Structure, which determines the location of decision-making power

• Processes, which have to do with the flow of information (they are the means of responding to

information technologies)

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• Reward systems, which influence the motivation of people to perform and address

organizational goals

• People (human resource) policies, which influence and frequently define employees’ mind-sets

and skills

The message of the star model is that all five dimensions must be consistent among themselves,

and the four below must be particularly consistent with strategy, at the top of the model. When

the different combinations of organizational dimensions that characterize the more customer-

centric capabilities are used, different solutions

strategies can be identified and implemented.

The differences begin with the elements that make up the strategy The product centric company

strives to have the best or leading products, achieved through a continuous flow of new

offerings. The company remains at the cutting edge by adding new features that open the market

to new applications and new customers. In contrast, the customer-centric company strives to

provide the best solution for the customer’s needs. This solution may or may not include the best

products; the best solution will involve a customized and personalized package of reliable

products, services, support, education, and consulting to make the customer more effective.

The most important customer for the product-centric company is the highly advanced customer.

This customer challenges the company to stay on the cutting edge and develop new and

improved products, which are priced on the basis of the market and competing offerings. The

customer-centric company likes the advanced customer as well, but it is the most loyal and

profitable customer that is the most important; the customer relationship is the valued asset.

Based on this relationship, the customer-centric firm prices its offerings on the basis of the value

it creates for the customer. That is, a solution is priced not on the sum of the prices of the

products and services that constitute the solution, but on the savings and improvements that the

customer experiences.

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An example is the recent trend at business schools offering custom courses to companies. These

courses were initially offered as products, like a one-week course in supply-chain management.

For thirty to forty people, the price would be $150,000. If the company wanted customized cases

and materials, it paid for the faculty time to develop these materials at $5,000 per faculty day.

Now, instead of charging per week and per day, some schools are pricing to value.

That is, they charge the company 5 percent of the savings that result from improvements to the

supply chain generated by the program. If the company documents $100 million in savings, the

school gets $5 million for the program. Value pricing shares the risks as well as the rewards: if

there are no savings, the school gets nothing.

Pricing to value aligns the interests of the customer and the supplier. It also requires the supplier

to have an in-depth knowledge of the customer’s situation. In the example, the business school

would need to know a great deal about supply-chain management and about the customer’s

unique version of supply. If the company were Unilever, the business school would need to

know about frozen food supply chains as well as those that operate at ambient temperatures.

This in-depth knowledge is best developed over time, through working relationships.

5.2 Structure and Processes

Decision making at the product-centric firm revolves around priority setting for a portfolio of

products (Table 5.2). These decisions are facilitated by an organizational structure based on

product line profit centers. The business plans and reviews are focused on products. When

management reviews a business, the discussion is about products—competitors’ products and

new products. The entire orientation is different at the customer-centric company. The leaders

there manage customer or customer segment profit centers. The plans, information systems, and

business reviews revolve around customers; the company sets priorities around a portfolio of

customers.

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Table 5.2

These structures, conversations, and information systems shape the mind-sets of the leaders of

these companies. The management processes of planning and budgeting are oriented primarily

around either products or customers. Likewise, the key business processes and measures of

performance will be different. The most important process in a product-centric company is the

new-product-development process; product-oriented companies like Sony and Hewlett-Packard

devote a great deal of energy to designing and improving their processes for developing new

products. The customer-centric company also develops products, but the most important

processes are customer relationship management (CRM) and solutions development and product

portfolio processes. A customer-oriented company will invest heavily in a CRM process that

captures customer interactions at all touch points for the most profitable customers. And in

addition to a product development process, it will have a solutions development process to

combine products and services to create value for the customers.

Usually the customer-centric firm will invest along with partners in creating a replicable

solutions platform when supplying a solution to the initial customer. And finally, a solutions

provider must have a process for planning the entire product portfolio. Thus, when a computer

company like IBM develops a new high-end server, it also needs a new high-end storage product

to complement it. The software business needs to introduce a complementary operating system

and an updated version of database software. Global services needs to introduce new courses

from its education business, updated practice areas from its consulting and systems integration

units, and new-customer service contracts. All of these business units need to have the same set

of priorities. A storage business at a productcentric company would introduce the best product to

exceed EMC’s latest product. The companies therefore measure themselves differently: the

product-centric company uses market share measures as well as targets for the percentage of

revenue coming from new products; the customer-centric company measures success by the

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share of customer spending in the business area, as well as customer satisfaction and retention

measures.

5.3 Rewards and People

The measures employed also become the basis for rewarding employees (Table 5.3). Product-

centric companies reward salespeople and managers with commissions or bonuses based on

market share, and technical people have as their highest reward being assigned to the most

challenging next product. A customer-centric company like Siebel Systems uses commissions as

well, but the commission is paid to the salesperson one year after the sale and is proportional to

the customer’s satisfaction with the software system purchased. (See Table 5.3.)

The most powerful people at a product-centric company are those who develop products. The

product development function is the most powerful organizational unit, with people known by

the products they develop; everyone at 3M knows Art Fry and the story behind his development

of Post-It Notes. Product-centric companies select and develop innovative types with in-depth

product knowledge.

Table 5.3

The most powerful people at a customer-centric company are the relationship managers serving

the most important customers. These companies work to develop general managers for an

account, not sales people for a product. The account managers have an in-depth knowledge of

the customer and the customer’s business and are skilled at building customer relationships.

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Whereas product-centric salespeople are transaction oriented, those who are customer-centric

have relationship skill sets intended to generate repeat business.

5.4 Culture

All of these elements create a new-product culture or customer-relationship culture. While the

mind-sets at product-centric companies are focused on creating as many possible uses of the

product as possible, customer-centric mind-sets search for the best combination of products for

the customer and ways to expand the portion of the customer need set that they can serve. The

greatest difference between the two cultures is their allegiance in a transaction: a productcentric

company like Sony is on the side of the seller, while the customer-centric consulting, systems

integration, and outsourcing businesses at IBM are on the side of the buyer. One corporation may

find its subsidiaries on opposite sides of the culture. The branch personnel at Chase Manhattan

Bank are on the side of the seller, promoting Chase credit cards and Chase mortgages for which

they will receive a commission. But the relationship managers at Chase Private Bank (for their

high-net-worth customers) are on the customer’s side, suggesting the best investments—which

may or may not be Chase mutual funds or the stocks issued by Chase’s investment bankers. The

success of relationship managers is measured by customer satisfaction, retention, and asset

growth. Organizing around the customer involves adopting solutions strategies, customer profit

centers, CRM processes, and customer- share and -retention reward systems and selecting and

developing relationship managers. These practices create a relationship and a solutions culture.

5.5 A Word of Caution

It is possible to be customer-centric to a fault. For example Japanese software companies are

usually accused of being dominated by their customers (“Breaking the Keiretsu,” 2001). If a

Japanese software company has two hundred customers, it will create two hundred versions of

every software product that it offers. These companies have been unable to get scale and expand

outside of Japan. Another issue is becoming too focused on your best existing customers. New

disruptive technologies are often adopted by different customers first (Christensen, 1997). Then

as the technology improves, customers eventually move to the new disruptive technology. You

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lose your best customers because initially they were uninterested in the new technology. When

they become interested, it is too late for you to change. Christensen’s solution is to always have a

unit prospecting for new customers and new technologies.

When a possibly disruptive technology comes along, put it in a separate subsidiary and protect it

from the core business. As always, a balanced perspective is needed.

5.5 Conclusion for model

With the advent of buyer power, the wise manager will be shifting the ramifications of “keep it

simple” from an internal credo to a customer pledge. Companies should stop asking if a

customer-centric application should be implemented, and instead ask how much customer

centricity is mandated to remain competitive and healthy.

The challenges facing implementation include discerning the appropriate level, taking the steps

necessary for successful structural reorganization, and doing what is necessary for successful

psychological reorientation. Unless the product-centric mind-set of personnel is updated along

with the product-centric organization itself, no true growth can really be expected.

6. Leading Through Management Processes

There have been repeated references throughout this report for the need for strong corporate

leadership. Indeed, the discussion of the failure experiences directly attributed those outcomes to

the lack of strong leadership. So if it is critical in customer-centric firms, how does leadership get

exercised? In a quick answer, it is through the company’s management processes. The front-back

organization requires the addition and successful execution of three additional management

processes. This chapter describes these processes based on the observation of the best practices

taken from the case study companies. These processes are unique to front-back structures. But

before describing the leadership role in these processes, let us review the leadership in managing

any strategic change.

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6.1 Leading Strategic Change

Introducing a customer-centric organizational unit into a product centric company is like

introducing diversification, global expansion, or any other strategic change. Some key players

will support it, while others will not, and still others may resist. It is the task of leaders to create a

sense of urgency and to enroll the key players in the discussion and debates in order to have them

shape and buy into the new direction. There are plenty of books and frameworks for leading

change (see Beer and Nohria, 2000, for example). The point is that leaders need to confront the

resisting key players and resolve the conflicts that accompany any strategic change. Leading the

confronting and resolution of these conflicts requires strong leadership. A second aspect of

leading any strategic change is to see that the change is comprehensive. That is, the leaders must

see that all of the policies of the star model have been changed to align with the strategy. Simply

adding a customer-centric unit to the structure will not work. All of the processes are still

product-centric and not compatible with the new unit, or are even antagonistic to it. Indeed, it is

when the funding decisions for solutions are given to the customer-centric unit that the change in

power becomes clear and concrete. Then the real resistance appears. This change in funding is

the opportunity for confrontation and the exercise of leadership. By completing the design of the

organization, all of the pockets of resistance can be flushed out and resolved. Everyone in the

organization will see the clarity in the newly aligned organization.

The third aspect of managing strategic change is the management of conflict. Conflict is inherent

in any major change and needs to be managed as such. But conflict is also a natural part of the

day to- day management of a front-back structure, which delivers solutions.

The customer-centric front end is on the side of the buyer, while the product-centric back end is

on the side of the seller. A business unit will want to pursue its unique product opportunities

rather than play a subordinate role in a solution. Pricing, priorities, and talent allocation all

generate an unending stream of conflict laden issues. There are two things that effective leaders

do. First, they legitimize the conflict. Too often conflict is seen as a problem. In a front-back

organization, the appearance of conflict is a sign that the strategy is working. Leaders make

differences of opinion and conflicts a natural part of the business day. Second, they lead a

46

process that results in a thorough airing of the issues and a timely resolution of them. Like

change, managing conflict is a well-researched issue (Eisenhardt, Kahwajy, and Bourgeois,

1997).

The other key feature of the organization design for a front-back organization is the management

and business processes that link the front and back. It is in these processes that the leadership

exercises its strong role and leads the resolution of the inevitable conflicts.

6.2 Linking Processes

Management processes are a critical factor in the successful implementation of front-back

structures. The reason is that there are so many issues on which the front and the back will have

different positions. The processes are designed to channel these issues to the right forums,

support them with the necessary information, and see that the right players are around the table

or the speaker phones. As a result, the front-back organization of a solutions provider will have

three types of additional processes. The product-centric company has a strategic planning

process in which business unit plans are reviewed and prioritized. The solutions provider also

has business unit plans. But it also has customer or customer segment and solution plans. These

two types of plans need to be reconciled with the business units into a single company plan. The

product-centric company has a product development process. The company implementing a

solutions strategy has a product development process as well as a solutions development process

and a product portfolio process. A stand-alone product provider has an order fulfillment process.

The solutions provider has an order fulfillment process as well as an opportunity management

system for responding to large solution applications. So the solutions strategy company is more

process intense. Let us look at these three types of management processes and see how leaders

are to perform their strong role.

6.3 Reconciling Strategies

In addition to product strategies, the solutions company must generate customer and solution

strategies. At IBM, the plans and strategies are created for servers, desktops, storage units,

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database software, Lotus software, and other products. There are also strategies for a thousand

global customers, which are aggregated into industry groups. Within each industry, the

customers are prioritized according to profitability. Then the customer and solution strategies

must be reconciled with the product strategies. A product general manager may feel that a

customer unit is not featuring the manager’s product line as it should. Another product general

manager may want to opt out of what appears to be an unattractive solution. There are many

opportunities for priority disputes between product and customer managers as well as across

product managers. Usually top management performs the reconciliation using a spreadsheet like

the one shown in Figure 6.3. Management first encourages product, customer, and solution

managers to work out their priorities. There is a product manager for each row and a customer or

solution manager for each column. If differences cannot be resolved, management intervenes

with the involved managers or with a larger group representing the leadership, the product

managers, and the customer and solution managers. Either way, the leadership emerges with a

spreadsheet with the joint goals for the product lines and customer segments. The purpose of the

spreadsheet exercise is to align the goals of the front and back of the organization. They both are

to have the same goals.

Figure 6.3

Of course, the plan starts to change no sooner than it is completed. In this case, the leadership

convenes a session with managers of the rows and columns of the spreadsheet, and they hammer

out a new plan. The frequency of these revisions fits with the time cycles of the market. The

leaders of a stand-alone product business can meet and resolve issues with one business unit at a

time. The leaders of a solutions provider must convene the right players and resolve issues

around the table. The strength to manage this team process is a different leadership requirement

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for the solutions provider. And the spreadsheet planning process is the forum for the exercise of

the required leadership. The difficulty of managing this process varies directly with the

complexity of the solution. Medium level means that fewer managers must gather around the

table than at high-complexity companies.

The medium-complexity company combines fewer components, and they are not as tightly

coordinated. The high-complexity company has more managers and more different managers

seated around the table. And the more tightly integrated the products are, the more tightly

coordinated must be the managers of those products. Different solutions strategies will create

different requirements for the planning process and for leadership.

6.4 Portfolio Planning and Solutions Development

Every company has a product planning process. Solutions providers have a portfolio planning

and a solutions development process as well. Each product unit develops its own products, but

each unit’s products must work together with the products of other units to provide a solution.

The strategy dimension of component integration is important in determining how much effort

must go into planning the entire portfolio so that the products will work together. For example, if

Nokia is going to offer third-generation equipment, it must have switches and transmission

products, software, consulting practices, and customer service contracts as well as handsets that

all work together using third-generation technology. The product units cannot independently

develop their own product lines without a dialogue. Again, a strong top management team is

required to guide the portfolio planning process. The Nokia software product business may want

the freedom to challenge Microsoft. However, Nokia will also need a totally integrated product

line in order to provide customer solutions. Through the portfolio planning process, the software

and other product groups have to develop a strategy that advances their product line and

integrates the products into solution offerings. In addition to developing products, a solutions

strategy requires a solutions development process. There are two aspects to this development

process. The first is the choice of what solutions to offer. Usually the solutions providers, like

IBM and Sun, choose solutions that can be replicated. Replication then requires a process to

create a solution that can be sold to other customers. If every solution is unique, the company

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cannot make much money on them. It needs to invest up front and then replicate the solution to

get a return on its fixed investment. Sun uses its planning process to reach agreement on which

solutions it will provide. The solutions unit creates teams of five or six people for each chosen

solution such as portals, CRM, and e-markets, among many others. The unit also chooses which

solutions it will not provide.

The second aspect is an explicit process, like the new-product development process, to develop a

replicable solution. Usually a solutions provider works with a lead customer and invests in the

solution so that it can be sold to other similar customers. IBM, for example, tries to start with

Swedish banks for its financial services solutions in Europe. It believes that innovation starts in

the north of Europe and moves south. Sun uses its i-Force process, a step-by step process starting

with determining a customer strategy to provide certain customers with a jump-start to get on the

Internet. Sun uses its Ready Centers to gather people from the customer, its partners like EDS,

and its own field marketing solutions unit. The process typically starts with a lead customer

suggested by an account manager or partner. Upon approval of the project from the solutions

group, a team gathers in a Ready Center to create an integrated stack, as shown in Figure 6.4, for

the customer’s application. The partners are also selected for applications and are certified in the

i-Force process. Upon implementation, the solutions team documents the solution and trains and

creates solutions champions in the field marketing regional units. These champions assist

account teams in selling the solution to other customers and leading through the i-Force process

for solution.

6.5 Opportunity Management Process

The third key management process is the opportunity management process. Solutions

opportunities appear from customers and require a proposal. Then if the opportunity is captured,

the proposal must be implemented. The more complex the solution is, the larger the proposal and

execution teams must be. The more resources that must be

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Figure 6.4

marshaled and the greater the need for a strong project manager, the more complex the pricing

decision and revenue allocation to the component products must be. Again, the more complex

solutions strategies create the greatest challenges to the leadership. The best example of an

opportunity management process was described in Chapter Five for IBM as Omsys. In matching

resources to opportunities, Omsys initially relies on two products from the planning process. One

is the customer plan in which the big opportunities are usually identified and resources

earmarked for them. However, the exact timing of a proposal acceptance is usually

unpredictable, and the size of the project is usually larger or smaller than anticipated. At this

time, the opportunity owner uses the second product or the priority assigned to the customer to

gather the additional or new resources. Owners for top-priority customer opportunities have

better access to resources than those for low-priority customers do. If disputes or shortages arise,

these issues become agenda items for the regional leadership teams. These teams give the overall

guidance and make decisions about the assembly and disassembly of teams for opportunities.

The European leadership team at IBM meets weekly but can gather more frequently when there

is a need for real-time staffing of projects.

The challenge of implementing regional and global talent allocation processes is in accessing all

the information needed to get a good match between the opportunities and the talent. The

decision making group needs to know the set of opportunities available, the scope of work at the

projects for these customers, and the nature of the talent available. It is the information about the

talent that is particularly challenging. Most management teams are experienced at allocating

money from a total company perspective. But talent involves three issues that make allocating it

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on a company-wide basis difficult. For starters, a dollar equals a dollar. But a software

programmer does not equal a software programmer. A good programmer can be ten times more

productive than a mediocre one. So the decision makers need to know the individuals who are

invaluable. But there may be hundreds or more people in the talent pool. Second, dollars do not

care if they are spent on R&D or advertising. But people care very much where the project is

located and whether it is challenging.

The top-down assignment of critically skilled people to projects that they do not like will cause

them to leave and join a competitor. So the decision makers need to know the work preferences

of the critical people. And finally, dollars do not care with which dollars they are combined to

fund an initiative. For people, their coworkers are important. Again, the decision makers need to

know something about the chemistry among key team members. These factors are all important

to the effective functioning of opportunity teams.

Some firms try to capture as much of this information as possible. Some of it can be captured in

formal information databases to create company “yellow pages” for talent that can be accessed

by decision makers. But much of it cannot be captured. So in order to bring all the data to the

table, some consulting firms increase the number of people at the decision-making meeting.

Ernst and Young (E&Y) Consulting would convene a regional task force for one or two days if

needed to match talent to opportunities. Like other consulting firms, E&Y used scheduling

managers at all of its large offices. For most projects, the account managers and scheduling

managers can arrive at acceptable staffing plans for projects. But in the late 1990s, there was a

shortage of programmers who knew the SAP application language. Then E&Y, at the initiation

of the scheduling managers, would convene a task force when shortages developed. It would

gather people who knew the customers, the projects, and the talent specialties. It would even

include some of the key specialists in the meeting. These people could choose assignments or

have a voice in the assignments that they felt were attractive. The task force could involve thirty

to forty-five people in matching resources to opportunities. In this manner, the firm was able to

get a total perspective on the set of opportunities, the business priorities, the nature of the

projects, and the needs and desires of the talented people. (E&Y even experimented with a spot

market for an SAP programmer for a week.) These real time talent allocation processes are the

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current challenge for solutions firms. It is difficult to get a total company perspective and also

know the details of preferences of talented people and the chemistry of combinations of them.

Yet this information is exactly what is needed to satisfy important customers and motivate and

retain those who service those customers. The consulting firms and investment banks are

probably the most advanced in this area. The solutions providers need to advance their

management teams to this level. Most management teams are used to deciding global issues on a

periodic basis, not the required real-time basis. They have learned to discuss talented people in

assessing promotion needs of the company and development needs of the top 150. But matching

talent to the top opportunities in real time is a new challenge for them.

6.6 Conclusion

The effective solutions providers are those with strong leadership teams that confront and resolve

the continuous flow of contentious issues. These conflicts are channeled into three key

management processes for discussion, debate, and resolution. These processes are the strategic

reconciliation of product and customer plans, the product portfolio, and opportunity management

processes. These processes are the forums for the exercise of strong leadership.

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7. CASE STUDY

7.1 INTRODUCTION

The customer across the table has taken long pause and stated – “The service levels are just

pathetic and doesn’t deserve even a discussion.”

This statement from company’s loyal customer for a long time sets the tone for a very important

business differentiation – “Customer delight”.

7.2 BACKGROUND

Once upon a time at Bluestar, the customer delight was the mantra during its inception and

growth phase. However since past couple of years, the quality of services gradually eroded and

as a result considerable chunk of customers started finding other avenues & made alliances.

The customer realized that company executives are after the quarterly numbers and stopped any

value addition to the account.

7.3 THE PROBLEM

The people in the organization stopped listening to customer and increasingly grown silo centric.

No one is passionate enough to understand the customer requirements and real needs.

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7.4 THE PARADIGM SHIFT

When the company all India services head visited the long standing loyal customers, he has

realized dire need of the hour – “The customer centric service team”. The feedback from the

customers has been sought in a specified manner as below:-

The All India Services head had met all the key customers with above feedback form &

segregated the feedback as below:-

CUSTOMER FEEDBACK BASED ON MARKET FEEDBACK ANALYSIS

SCORE (1-10)

No single point contact for complaint logging & followup's 3   Complaint is not getting attended immediately till people are chased 4   Complaints not getting closed and kept open for trivial issues 4   Not getting part replacements and waiting is unending 3   Technician are as good as laymen and takes repeated visits to solve complaints 2   Unable to distinguish the technicians from roadside labour 4   Technicians coming in chappals and does not bother about safety 3   Technicians installing the new units as per whims & wishes 3   No quarterly servicing & pathetic service quality 2   It seems company not bother about AMC business 4   No one meets us till we escalate matters to highest level 3   We are forced to talk to some 10 people for same purpose 2   Time is getting wasted on annual basis for AMC negotiations & Spare part 0

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orders

As a first step towards building “Customer centric service team”, the service & sales team,

commercial team, logistics team had a offsite business meeting for three days. The market

feedback analysis of the customers has been shared with all the team members.

The team was divided into various groups & asked to come out with three brilliant ideas against

each customer concern. The clear idea of being closer to the customer in every process has been

driven & made as mandatory for every idea. After preparing the list of the ideas, an exhaustive

brain storming sessions & value stream mapping sessions are carried out to pick up single best

idea for customer concern.

The final list of Best Ideas selected by Team against each customer concern as below:-

CUSTOMER FEEDBACK BASED ON MARKET FEEDBACK ANALYSIS

SCORE

(1-10) BEST IDEA SELECTED

No single point contact for complaint logging & followup's 3 Call centre     Complaint is not getting attended immediately till people are chased 4 Response time     Complaints not getting closed and kept open for trivial issues 4 Resolution time     Not getting part replacements and waiting is unending 3 Spare part delivery     Technician are as good as laymen and takes repeated visits to solve complaints 2

Technical competency

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     Unable to distinghush the technicians from roadside labour 4

Visal aspects & Soft skills

     Technicians coming in chappals and does not bother about safety 3 Safety compliance     Technicians installaing the new units as per whims & wishes 3 Installation quality     

No quarterly servicings & pathetic service quality 2

Preventive Maintenance Services

     It seems company not bother about AMC business 4 AMC support     No one meets us till we escalate matters to highest level 3 Relationship     We are forced to talk to some 10 people for same purpose 2

Key accounts vertical

     Time is getting wasted on annual basis for AMC negotiations & Spare part orders 0 Rate contract

7.4 Customer centric team formation:-

Based upon the observations & working experience with his team members, the all India services

head selected the cream of passionate individuals to drive the customer centric initiatives across

the organization.

7.5 Methodology of Implementing customer centric ideas:-

The below star model has been chosen for implementation of customer centric ideas.

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1. Customer Concern:-No single point contact for complaint logging & follow up's.

Best Idea:- Call centre

Implementation:- Proposal prepared with service design ; process flow chart ; allocation of

resources ; Approvals taken for necessary budgets ; National Call centre opened with toll

free number and circulated to all internal & external customers.

2. Customer Concern:- Complaint is not getting attended immediately till people are

chased.

Best Idea:- Response time circular.

Implementation:- Dealer Management system (DMS) has been designed & rolled out at

channel partners locations. The system is auto driven measuring response time & resoution

time, history of the complaints. Response time of 4 Hours for service requests defined ;

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circulated within service team ; After aligning the team with response time same has

communicated to channel partners & customers.

3. Customer Concern:- Complaints not getting closed and kept open for trivial issues.

Best Idea:- Resolution time circular.

Implementation:- Resolution time for Minor & major complaints defined as 24 Hours & 72

hours respectively ; Necessary standard operating procedures prepared & circulated within

service delivery team.

4. Customer Concern:- Not getting part replacements and waiting is unending.

Best Idea:- Spare part delivery

Implementation:- Rate contracts with national logistics companies has been revised and

made competitive. Clear SLA & TAT specified ; Penalty process for failing spare delivery

dead lines was streamlined. Minimum stock level statements revised and made auto

generated to maintain key spare parts at branch ware houses / stores.

5. Customer Concern:- Technician are as good as laymen and takes repeated visits to

solve complaints

Best Idea:- Technical competency.

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Implementation:- Nationwide Technician accredited programme (TCP) with layers of

simple to complex technical modules has been created ; Qualified technicians were

encouraged with certificates and given eligibility to participate in further technical training

modules.

6. Customer Concern:- Unable to distinguish the technicians from roadside labour.

Best Idea:- Visual aspects & Soft skills.

Implementation:- Company made investments in Uniforms ; ID cards. Softskills training

company was hired to train technicians; Role plays conducted.

7. Customer Concern:- Technicians coming in chappals and does not bother about safety.

Best Idea:- Safety compliance

Implementation:- Company persuaded the safety as core value. Developed Cardinal rules ;

Fatality prevention modules on electricity ; compressed gases & working at heights ;

Standard safe practices documents prepared.

8. Customer Concern:- Technicians installing the new units as per whims & wishes.

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Best Idea:- Installation quality

Implementation:- Certified Installer Programme (CIP) has been rolled out to measure

installation quality & to reward the best technicians in field.

9. Customer Concern:- No quarterly servicing & pathetic service quality

Best Idea:- Preventive Maintenance Services Policy

Implementation:- In DMS, Auto PM schedule is generated to each dealer ID. Dealers can

view respective PM schedules & plan accordingly to cover 100% PM services. Dealer can

update & upload PM reports in DMS, so that Bluestar can bill the services to customers.

10. Customer Concern:- It seems company not bother about AMC business.

Best Idea:- AMC support

Implementation:- In DMS, AMC offer are auto generated based upon warranty/AMC start

& expiry dates of machines punched by dealers at installation stage. This feature ensures

100% AMC offer submission to customers before 1 month of warranty/AMC expiry.

11. Customer Concern:- No one meets us till we escalate matters to highest level.

Best Idea:- Building Relationship

Implementation:- Go to market (GTM) Strategy chalked out to ensure senior

management & regional management is in market and closer to customers, dealers. This

drive also ensured company promoting the new product launches, trade exhibitions in lieu

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with HVAC consultants, Architects & ensured that these key relationships touching the base

at all times. Corporate, Regional managers started meeting key customers on Monthly /

Quarterly basis to keep the traction going on with company.

12. Customer Concern:- We are forced to talk to some 10 people for same purpose.

Best Idea:- Key accounts vertical.

Implementation:- Key accounts vertical has been created within the company ; One single

manager was assigned to deal with set of key account customers to have more focus and

touch point.

13. Customer Concern:- Time is getting wasted on annual basis for AMC negotiations &

Spare part orders.

Best Idea:- Rate contract

Implementation:- Rate contracts for 5 year / 3 year period with key customers had been

finalized to save precious time and to avoid repeat negotiations.

All the above 13 Nos. customer centric initiatives have been implemented vigorously across the

organization for 2 years period.

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Subsequently, All India services head had met all key customers once again for seeking their

satisfaction level & feedback on these new initiatives. All Key customers had given their

satisfaction levels & valuable feedback. Further, few customer have given their testimonials of

Best service experience.

The present day customer satisfaction levels are as below:-

CUSTOMER FEEDBACK BASED ON MARKET FEEDBACK ANALYSIS

OLD SCORE

(1-10) BEST IDEA SELECTED

PRESENT DAY SCORE (1-10)

No single point contact for complaint logging & followup's 3 Call centre

8

       Complaint is not getting attended immediately till people are chased 4 Response time

7

       Complaints not getting closed and kept open for trivial issues 4 Resolution time

8

       Not getting part replacements and waiting is unending 3 Spare part delivery

7

       Technician are as good as laymen and takes repeated visits to solve complaints 2

Technical competency

8

       Unable to distinghush the technicians from roadside labour 4

Visal aspects & Soft skills

7

       Technicians coming in chappals and does not bother about safety 3 Safety compliance

7

       Technicians installaing the new units as per whims & wishes 3 Installation quality

6

63

       

No quarterly servicings & pathetic service quality 2

Preventive Maintenance Services

8

       It seems company not bother about AMC business 4 AMC support 8

       No one meets us till we escalate matters to highest level 3 Relationship

9

       We are forced to talk to some 10 people for same purpose 2

Key accounts vertical

8

       Time is getting wasted on annual basis for AMC negotiations & Spare part orders 0 Rate contract

9

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8.1. Benefits:-

The above improvement in customer satisfaction scores directly contributed towards Sales

& Service Revenue increase. The after sales service quality & overall customer service

experience remarkably improved & touch the heights of setting up new industry

benchmark.

8.2 Conclusion:-

“Being closer to the customer with a customer centric designed organization and passionate

customer service culture always pays off as a major differentiator in business

development.”

8.3 Limitations:-

1. Judgment of how much should be the level of customer centeredness is a limitation

for organizations.

2. The whole customer centric approach & process demands greater level of patience,

time & monetary investments from all levels of management. The results can not be

expected in span of few months/years.

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Bibliography: -

1. Designing the customer centric organization – A guide to Strategy, Structure, and

Process.- Jay. R. Galbraith.

2. Customer Centricity – Embedding it into your organization’s DNA- Deloltte

3. The Customer – Centric Organization from Pushing Products To Winning Customers -

Booz &Co.

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